Branstad: High Medicaid costs complicate expansion

Published: Tuesday, Dec. 11, 2012 11:50 a.m. CST

DES MOINES (AP) — Gov. Terry Branstad said Iowa’s state budget is already being squeezed by health care costs, even before a federally mandated expansion of the state’s program takes effect next year as part of the 2010 health care act signed by President Barack Obama.

But if Branstad and other Republican governors hoped to exempt their states from that expansion, they also received that answer on Monday.

The administration said Iowa and other GOP-led states seeking flexibility must commit to fully expanding their Medicaid programs in order to receive maximum funding under the new law.

Branstad and governors from 10 states had written to Obama last week requesting flexibility in complying with the federal act’s requirement that they expand Medicaid, the federally funded state health care program for poor people, to cover people up to 138 percent of the federal poverty line. That would include individuals earning about $15,400 a year.

“We’re concerned that Medicaid has been the biggest growing cost to state government,” Branstad told reporters Monday. “And now we’re concerned about the federal government mandating an expansion.”

Iowa budget officials say insuring existing Medicaid recipients now eligible for the benefits will increase an estimated $57 million in the year that starts in July and another $31 million the following budget year.

Branstad said the cost increases are due to Iowa’s healthy economy. Iowa’s unemployment was 5.1 percent in November, compared to 7.9 percent nationally, and Iowa’s state tax revenues are projected to rise in 2013. States with lower average per capita incomes are reimbursed for Medicaid services at a higher rate.

Branstad and governors from Arizona, Florida, Louisiana, Maine, Mississippi, Ohio, South Dakota, Utah, Virginia and Wyoming had asked Obama in the letter dated Dec. 4 to “create flexibility and reforms in the program.”

The administration remained firm on the point that states that do not expand to the federal requirement will not receive 100 percent funding beginning in 2014.

After three years, states are scheduled to gradually adopt more of the costs of the Medicaid expansion, not to exceed 90 percent.

“The law does not provide for a phased-in or partial expansion. As such, we will not consider partial expansions for populations eligible for the 100 percent matching rate in 2014 through 2016,” according to a memo published Monday by the Department of Health and Human Services.

Branstad argued Monday that Medicaid, created in the 1960s, is too focused on medical treatment and has not kept pace with efforts to promote personal health maintenance. “This is a Cadillac program. The problem is it is a rusted-out Cadillac,” Branstad said.